MasterCard Alters Fee Structure

Expressing a laughable level of shock and naiveté, Mallory Duncan, general counsel for the National Retail Federation, had this to say about MasterCard’s merchant-fee structure:

"They are pricing each tier at the absolute most they can so they can maximize their income," Duncan told the <i>Wall Street Journal</i> in denouncing the new fee-structure plan.

Yes, Mallory Duncan: MasterCard wants to maximize their income.  Retailers want to maximize their income, too.  Turns out, that’s the way the game is played.

The new fee proposal – which the <i>Journal</i> describes as confusing, mostly because it is – is irksome to the NRF because it means some retailers will have to pay higher fees to accept credit cards.  MasterCard, like Visa, who did the same thing back in 2004, has retailers at a bit of a disadvantage: consumers like the convenience of paying with plastic; so it’s unlikely retailers can remain successful while simultaneously declining to accept credit cards.

In explaining/defending the new structure, MasterCard said that it “allows us to have a more sophisticated way to break up our [credit-card] portfolio.”  And, even though MasterCard wouldn’t be gauche enough to mention it – there’s the whole “maximizing income” piece as well.

The NRF and merchants have pursued some redress against both MasterCard and Visa.  They’ve filed a series of lawsuits accusing the card companies of anticompetitive behavior in the way they set the fees. Those cases are pending. The financial institutions that issue cards are estimated to collect $25 billion in interchange fees each year.